Indicator with 100% success rate predicts huge rally for stocks

Indicator with 100% success rate predicts huge rally for stocks: "The report goes on to state that when the indicator, which dates to 1985, "has been this low or lower, total returns over the subsequent 12 months have been positive 100 percent of the time, with median 12-month returns of +27 percent."

At this point, the indicator "implies a 12-month price return of 20 percent, and a 12-month value of 2,604"; for a 22 percent return after the S&P's 2 percent dividend yield is added in

To be sure, this is not BofAML's S&P 500 target. Indeed, the slightly ironic subtext to the report is that BofAML's own head strategist, Savita Subramanian, has a year-end price target of 2,000, which implies a big market drop into the end of the year.

She is concerned about the market's valuation and about high expectations for growth, and while Subramanian acknowledges the sell side indicator's sign, she also says that real-world positioning has become more bullish.

So should you follow the strategists, or sprint in the opposite direction?

It depends on how contrarian you feel, but one thing is for sure: stocks have tended to rise over time, and maintaining a substantial position in stocks over long time frames has proven a winning strategy no matter what Wall Street's prognosticators say.

Indeed, a December BofAML report finds it "worth noting that Wall Street recommended underweighting equities through the entire bull market of the 1980s and the 1990s," with an allocation to stocks below 55 percent being the dominant recommendation among strategists during that time period."



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